Mr Chidambaram, please show guts to win votes

October 15, 2014

UPA II should have had the courage to stand by its earlier decision to tax cars and SUVs higher to address the crisis of energy and pollution, says CSE

• Centre for Science and Environment slams the decision of the outgoing UPA II government to give sops to the car and SUV industry

• With this, UPA II government loses confidence of people in their ability to take effective positions and stand by the decisions needed to balance growth, well being and equity

New Delhi, February 17, 2014: Centre for Science and Environment (CSE) has slammed the new budget proposal to cut taxes on cars with fuel-guzzling and polluting SUVs enjoying the biggest slash. In last year’s budget finance minister Mr Chidambaram had, responding to the crippling energy crisis, hiked the excise on SUVs from 27 per cent to 30 per cent. But this year, buckling under pressure from the automobile industry, he has cut excise across all vehicle segments. Excise duty on small cars, motor cycles, scooters and commercial vehicles have been reduced from 12 to 8 per cent; on SUVs from 30 to 24 per cent; and large and mid-segment cars from 27/24 to 24/20 per cent. SUVs get the highest cut of 6 per cent.

Says Anumita Roychowdhury, executive director-research and advocacy, CSE: “If a government cannot stay consistent and bold about its earlier decisions to address energy security and public health, it loses the confidence of the people to deliver on the objectives of good governance. This is certainly a disturbing message just before the elections.”

This fiscal move will push the market towards heavier cars and SUVs that guzzle more fuel. Already, with the growing share of big cars and SUVs the average weight of the car fleet has increased from 1,037 kg in 2009-10 to 1,101 kg in 2012-13 – a 5-6 per cent weight increase leading to 3 per cent fuel economy penalty. Is this the price India should pay for luxury use of fuel?

Asks CSE: How can Mr Chidambaram justify highest tax cut for SUVs when their sales have remained the most robust compared to other vehicle segments? According to the SIAM release of late last year, while passenger cars sales had declined by 6.69 per cent the sales of utility vehicles had increased by a whopping 52.20 per cent during the financial year of 2013 compared to 2012. SUVs have remained the highest selling segment all through -- even during the height of recession in 2009-11, sales of cars and SUVs (2000 cc engines) increased by 41 per cent.

During the tenure of UPA II, petrol and diesel consumption together has increased by 35 per cent. SUVs and cars have further pushed up the diesel demand. The Union ministry of petroleum and natural gas has already reported that of the total diesel use (both bulk and retail), the share of car use (private cars and SUV taxis) is up to 22.09 per cent. Private cars alone use 13.15 per cent which is higher than buses at 9.55 per cent, agriculture at 13 per cent, railways at 3.24 per cent and mobile towers at 1.54 per cent. Cars and personal SUVs are the second highest users after diesel trucks at 28.25 per cent.

Even after completing two terms, the UPA government has not learnt to balance welfare and growth. In his budget speech Mr Chidambaran has alluded to India taking the third rank after the US and China in having a significant impact on the rest of the world. The finance minister should have also checked how Chinese cities are checking motorisation. Even after scaling up public transport, improving emissions standards and staying much ahead of Indian cities the Chinese cities including Beijing, Shanghai and Guangzhou have gone to the extent of capping the number of cars that can be sold in a year. China does not maintain price difference between diesel and petrol and cities like Beijing have banned diesel cars as a pollution control measure.

UPA II has decided to give this sop to diesel SUVs and all cars when air pollution and motorization in our cities have emerged as a serious public health problem. Last year, the Global Burden of Disease estimates have listed air pollution as the fifth largest killer while the WHO has classified diesel emissions as a class I carcinogen for its strong links with lung cancer, putting it in the same bracket as tobacco.

Says Roychowdhury: “Clearly, the UPA still lacks maturity in its fiscal governance. This political tokenism offers no electoral hope for clean, safe, healthy future.”

For more on this, please contact Souparno Banerjee at souparno@cseindia.org / 9910864339.